Question 1

Trisha Long wants to buy a boat in five years. She estimates the boat will cost $15,000 at that time. What must Trisha deposit today in an account earning 5% annually to have enough to buy the boat in five years?

Accepted Answer

A) $12,328.50 
B) $11,527.50 
C) $11,752.50 
D) $11,077.50 
E) None of these

Question 2

Solve by using compound table:
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Principal } & \text { Rate } & \text { Time } & \begin{array} { l } 
\text { When } \
\text { Compounded }
\end{array} & \text { Total Amount } \
\hline \$ 15,000 & 12 \% & \text { 4 years } & \text { Quarterly } & \text { ? } \
\hline
\end{array}$$

Accepted Answer

The answer of Solve by using compound table:
 \[\begin{array} {...

Question 3

Mia Kaminsky wants to attend Riverside Community College. She will need to have $25,000 six years from today. Mia is wondering what she will have to put in the bank today so that she will have $25,000 six years from now. Her bank pays 6% compounded semiannually. Using the tables in the handbook, the amount Mia will have to deposit is:

Accepted Answer

A) $18,950 
B) $17,625 
C) $17,535 
D) $33,622 
E) None of these

Question 4

Use the present value table to complete:
 $\begin{array}{|l|l|l|l|l|l|l|}
\hline \begin{array}{l}
\text { Future } \
\text { Amount }
\end{array} & \text { Length of } & \text { Rate } & \text { Table } & \text { Rate } & \text { P.V. } & \text { P.V. } \
\text { Desired } & \text { Time } & \text { Compounded } & \text { Periods } & \text { Used } & \text { Factor } & \text { Amount } \
\hline \$ 12,000 & 12 \text { yrs } & \begin{array}{l}
12 \% \
\text { Semiannually }
\end{array} & \text { A } & \text { B } & \text { C } & \text { D } \
\hline
\end{array}$

Accepted Answer

The answer of Use the present value table to complete:
...

Question 5

Jim Ryan deposited $8,000 at National Bank at 6% interest compounded quarterly. What was the effective rate (APY)? (Round to the nearest hundredth percent.)

Accepted Answer

The answer of Jim Ryan deposited $8,000 at National Bank...

Question 6

Pete Sist wants to buy a new Chevrolet in five years. He estimates the car will cost $24,000. Assuming Pete invests $15,000 now at 10% interest compounded semiannually, will he have enough money to buy the car at the end of five years?

Accepted Answer

The answer of Pete Sist wants to buy a new...

Question 7

The annual rate a bank advertises is the same as the effective rate.

Accepted Answer

A) True 
 B)False

Question 8

$100,000 for 20 years compounded at 4% annually results in a rate per period of:

Accepted Answer

A) 3% 
B) 5% 
C) 4% 
D) 1% 
E) None of these

Question 9

Burton Bush wants to retire in Arizona when he is 80 years of age. Burton, who is now 55, believes he will need $500,000 to retire comfortably. To date, he has set aside no retirement money. If he gets an interest rate of 6% compounded annually, he will have to invest today (use the tables in the handbook):

Accepted Answer

A) $92,300 
B) $90,500 
C) $100,500 
D) $116,500 
E) None of these

Question 10

The table for the compound value of $1 has only table factors over $1.00.

Accepted Answer

A) True 
 B)False

Question 11

In tables for calculating compound interest, the number of periods is equal to:

Accepted Answer

A) Number of years divided by rate 
B) Number of years × rate 
C) Number of years × number of times compounded per year 
D) Number of years divided by number of times compounded per year 
E) None of these

Question 12

Al Derover wants to buy a used jeep in five years. He estimates the cost will be $13,000. If he invests $8,500 now at a rate of 10% compounded semiannually, will he have enough money to buy the jeep at the end of five years? Show your work.

Accepted Answer

The answer of Al Derover wants to buy a used...

Question 13

Kelly Kuhn wants to purchase a new car for her son in five years. She estimates that the truck will cost $30,000 after all rebates. Assuming she invests at 8% compounded semiannually for five years, what must she invest today?

Accepted Answer

The answer of Kelly Kuhn wants to purchase a new...

Question 14

Effective rate (APY)is:

Accepted Answer

A) Never related to compound table 
B) Interest for one year divided by annual rate 
C) Interest for one year divided by principal for two years 
D) Interest for one year divided by principal 
E) None of these

Question 15

The interest on $6,000 at 6% compounded semiannually for eight years is (use table in the handbook):

Accepted Answer

A) $3,628.20 
B) $3,682.02 
C) $362.82 
D) $13,628.20 
E) None of these

Question 16

Compounding interest daily is seldom used in comparison to compounding once a year.

Accepted Answer

A) True 
 B)False

Question 17

Using the interest for daily compounding (in your handbook), $700 would grow to $790 at the end of three years at 8% interest.

Accepted Answer

A) True 
 B)False

Question 18

The effective rate (APY)can be calculated by the interest for one year divided by the principal.

Accepted Answer

A) True 
 B)False

Question 19

Use the present value table to complete:
 $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Future } & & & & & & \
\text { Amount } & \text { Length of } & \text { Rate } & \text { Table } & \text { Rate } & \text { P.V. } & \text { P.V. } \
 \text { Desired } & \text { Time } & \text { Compounded } & \text { Periods } & \text { Used } & \text { Factor } & \text { Amount } \
\hline \$ 14,000 & 5 \text { yrs } & 6 \% \text { quarterly } & \text { A } & \text { B } & \text { C } & \text { D } \
\hline
\end{array}$$

Accepted Answer

The answer of Use the present value table to complete:
...

Question 20

Compounding results in earning higher interest than simple interest.

Accepted Answer

A) True 
 B)False

Exam 12: Compound Interest and Present Value

Trisha Long wants to buy a boat in five years. She estimates the boat will cost $15,000 at that time. What must Trisha deposit today in an account earning 5% annually to have enough to buy the boat in five years?

Jim Ryan deposited $8,000 at National Bank at 6% interest compounded quarterly. What was the effective rate (APY)? (Round to the nearest hundredth percent.)

Pete Sist wants to buy a new Chevrolet in five years. He estimates the car will cost $24,000. Assuming Pete invests $15,000 now at 10% interest compounded semiannually, will he have enough money to buy the car at the end of five years?

The annual rate a bank advertises is the same as the effective rate.

$100,000 for 20 years compounded at 4% annually results in a rate per period of:

The table for the compound value of $1 has only table factors over $1.00.

In tables for calculating compound interest, the number of periods is equal to:

Al Derover wants to buy a used jeep in five years. He estimates the cost will be $13,000. If he invests $8,500 now at a rate of 10% compounded semiannually, will he have enough money to buy the jeep at the end of five years? Show your work.

Kelly Kuhn wants to purchase a new car for her son in five years. She estimates that the truck will cost $30,000 after all rebates. Assuming she invests at 8% compounded semiannually for five years, what must she invest today?

Effective rate (APY) is:

The interest on $6,000 at 6% compounded semiannually for eight years is (use table in the handbook) :

Compounding interest daily is seldom used in comparison to compounding once a year.

Using the interest for daily compounding (in your handbook), $700 would grow to $790 at the end of three years at 8% interest.

The effective rate (APY)can be calculated by the interest for one year divided by the principal.

Compounding results in earning higher interest than simple interest.